Confused About Tax Slabs on a 5 Lakh Salary? Need Help Understanding Deductions and Rates

I am shifting to a new company. Here, I am offered a 5 lakh package. According to government rules, up to 2 lakhs, no tax deduction applies. So, for the remaining 3 lakhs that I earned, do I need to pay tax, or do I have to pay tax for the entire 5 lakhs? Please help me out.

So, for the 5 lakhs, roughly will I need to pay 30,000 as tax or 50,000 as tax? My second question is if it's exactly 5 lakhs, in which tax slab will I fall? Is it in the 20% tax slab or the 10% tax slab?

Thanks in advance.

Mr. Ravi is correct in this regard. The tax limit up to Rs. 5,00,000 is 10%. That means when you cross Rs. 5,00,000, you have to pay 20% on the additional amount. In addition, a cess of 3% will also be charged. Rs. 1,80,000 (for males) will be exempt from tax.

Tax Calculation for Rs. 5,00,000

If the income is Rs. 5,00,000, the tax will be calculated as follows:

- Taxable amount = 500000 - 180000 = 320000.
- Tax @ 10% = 32000 - (1)
- Cess @ 3% on Tax = 32000 x 3% = 960 - (2)
- Total Tax = (1) + (2) = 32960.

Tax Calculation for Rs. 6,00,000

For Rs. 600,000, the tax calculation is as follows:

- Taxable amount = 600000 - 180000 = 420000.
- Tax @ 10% = 320000 x 10% = 32000 - (1)
- Tax @ 20% = 600000 - 500000 = 100000 x 20% = 20000 - (2)
- Total = (1) + (2) = 52000 - (3)
- Cess 3% = 52000 x 3% = 1560 - (4)
- Total Tax incl. Cess = (3) + (4) = 53560.

Regards,
Abbas.P.S

If you shift your present job to a new company in the mid-financial year, you have to add both salaries together (i.e., your previous earnings from the earlier company + the earnings from the new company). Then you have to calculate the payable tax.

For instance, if your total income stands at roughly about Rs 500,000 by adding both the salaries, then in the coming financial year (2012-13), you have to deduct first the Professional tax and then U/S 10/13(A) for residing in a rented house, and then Rs 200,000 as it is exempt from paying Income Tax. Next, deduct your savings U/S 80C up to Rs 100,000 & 80D up to Rs 15,000. You will get the taxable income amount (as the amount is much lower than Rs 500,000), and you will fall in the 10% tax bracket. Calculate the amount as 10% of that. As from this financial year, there will be no Education Cess, the calculated amount will be the final amount.

I hope you have a preliminary idea regarding it.

With regards,
Dipankar Parui.